Technology

Symantec CEO Interview: Security Firm's Too 'Bloated'

Symantec (SYMC) has a "bloated" management structure and "a lot of redundancies" in technology, including 24 Web service platforms, CEO Steve Bennett told IBD in an interview Thursday, less than 24 hours after announcing sweeping changes and "material" job cuts. He declined to say how many positions would be cut as the company "streamlines."

Bennett took the CEO helm at Symantec in July, and had been its chairman since 2011.

"I saw a company that had great assets, solving important customer problems, that for quite a long time had underperformed," he told IBD. "It had been losing share for a long time and basically investors had given up on it."

Symantec shares rose 1.2% Thursday, to a more than four-year high, after rising nearly 3% Wednesday on the heels of its earnings report.

The company's stock is now up 15% for the year, with most of the rise ahead of the expected reorg. Bennett told IBD the strategic changes don't mean that the company is choosing a security focus or a storage focus in particular at this point. Symantec got into data storage by merging in 2005 with Veritas.

"We see Symantec is embracing the McAfee Security Connected strategy but they are four years behind us," Mike Fey, McAfee chief technology officer, said via email. "Symantec highlighted the need for integration and scale, exactly what McAfee has focused on for more than a decade." He also says Symantec misses a key part of the equation without a focus on network security.

Symantec's strategy announcement suggests that some existing products could be overhauled, and that with about 150 products now, the company has no small task at hand in refocusing.

"Symantec's goal is to continue to improve its existing products and services, and at the same time develop new, innovative products and services that solve important unmet or underserved needs," it said in the announcement.

FBR analyst Daniel Ives, in a research note Thursday, said "we believe these strategic initiatives represent a step in the right direction for the company in light of years of missteps (acquisitions, execution issues), although we would have liked to have seen more, such as a divestiture of the company's storage assets."

Ives says it may be years before the full benefit of the new direction is realized, but that "near-term pains for long-term gains" may be the "key ingredient" for success.

He called the December quarter results solid, but noted the company guided below Wall Street estimates for the March quarter, as it starts its strategic transition.

Symantec revenue and profit for its fiscal Q3 beat analyst estimates. The company early Wednesday said it earned 45 cents per share minus items, up 7% from the year-earlier quarter, on revenue of $1.79 billion, up 4%. Analysts had expected 38 cents and $1.735 billion. Here was IBD's report.

The company also said it's splitting up the roles of chairman and chief executive. Bennett will remain CEO, as well as president. He's a former CEO of Intuit (INTU). Director Dan Schulman was elected non-executive chairman.

Symantec said its goal with the new strategic plan is to deliver better than 5% organic revenue growth and to get non-GAAP operating margins over 30% in the next two to three years. The margin was 25.6% last quarter.